Efforts Underway to Fix Excise Tax Issue for Air Taxis
July 27, 2012
The bill clarifies the exemption for charter and on demand flights. Current law contains an exemption for small aircraft operating on “non-established lines,” but ambiguous tax regulations and inconsistent applicability of this exemption have caused confusion within the aviation community as to when this exemption applies. The bill would clarify that non-scheduled charter flights to or from areas not connected by paved roads qualify for the non-established lines exemption.
The bill would also specify that the current exemption for sightseeing flights is not negated by intermittent stops to view an attraction, as is common practice for many Alaska flightseeing trips.
Several small Alaska air carriers, who have been battling the IRS over the taxes, in some cases for years, came to the delegation members asking for help with the issue. Alaska air taxi operators contacted Begich’s office in recent months after IRS agents started reinterpreting long-standing practices regarding payment of certain aviation excise taxes. The operators reported being threatened by the agents with more serious actions if the air taxi operators questioned the IRS tactics and applications of the rules and regulations.
In June, Sen. Mark Begich sent a strongly-worded letter to Treasury Secretary Timothy Geithner questioning the reported tactics of the Internal Revenue Service (IRS) against Alaska air taxi operators. In the letter, Begich criticized the IRS for inconsistent application of aviation excise taxes as well as the interpretation of exemptions for small air taxi operators. Begich said the IRS is trying to retroactively collect taxes, which threatens the viability of several small air taxi operators in Alaska.
Begich requested a meeting with Geithner or the appropriate IRS representative to discuss the issue and the Alaska Congressional delegation met recently with IRS officials and discussed the issue.
“After discussions with the Department of Treasury and the IRS, I think everyone involved will benefit from language clarifying this particular section of the tax code,” Begich said. “This bill would make the tax structure clearer for both air taxi operators and IRS auditors by making the tax code more consistent with the FAA’s definition of charter and on-demand operations. It’s about fairness for small businesses trying to comply with a complex and unclear tax system.”
“Alaskans know that a ‘one size fits all’ policy doesn’t fit Alaska’s unique needs,” said Murkowski. “I brought the Internal Revenue Service into the office last week to get resolution on this issue, because commercial aviation is a vital economic engine within the state. Our air carriers deserve tax clarity and reasonable accommodation for the uniqueness of their charter and air taxi businesses. Increasing taxes – or applying new ones – isn’t going to help these small businesses grow. We want to make sure Alaska’s skies are open for business.”
“Alaskans and Alaskan small businesses should not be penalized for a confusing tax code,” said Rep. Young. “While simple in nature, this legislative fix will clarify an unclear and often times inconsistent tax regulation relating to small air taxis. I look forward to working with both Senator Begich and Senator Murkowski in getting this fix signed into law.”
Edited by Mary Kauffman, SitNews
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